UPDATE ON Development : Despite Uncertainty in Market, Firm Plans 2nd Office High-Rise

Despite some uncertainty in the San Diego office market and within its own corporate structure, Cabot, Cabot & Forbes is proceeding with plans to build a second downtown high-rise office tower bounded by A, B and India streets and Kettner Boulevard, which is catercorner from the CC&F; building nearing completion at B, C, India and Columbia streets.

The new building will be roughly the same volume as the first building’s 343,000 square feet but only 17 or 18 stories high, contrasted with the first building’s 20 stories. CC&F; owns about two-thirds of the designated block but will depend on the city’s condemnation powers to acquire the rest of it, Senior Vice President Gary Toeller said Wednesday.

Toeller said the building will cost about $80 million and may end up being financed with help from the same Japanese limited-partner investors--C. Itoh, Daiwa Real Estate and Konoike Construction--that invested with CC&F; in the first building. Discussions with the Japanese are under way, he said.

Vacancy rates in “class A” office buildings downtown are now about 14.5%, Toeller said, which is less than the glut that exceeded a 20% vacancy rate earlier in the decade but still relatively soft. Buildings totaling 1.2 million square feet, or roughly 20% of existing inventory, are now under construction and scheduled to come on line downtown over the next year or so, Toeller said.

Toeller is not worried, given the fact that nearly 43% of the new space under construction has been leased, meaning that not that much vacant space will hit the market. His building, which is scheduled to open for tenants in December, is 70% leased, he said.

CC&F; majority owner Marshall Field V is restructuring the real estate company and is reportedly considering selling all of CC&F;’s Western real estate properties, including the San Diego office building. CC&F; nationwide owns 12 million square feet of office and industrial buildings.